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The Shady Ways People Are Losing Their Homes--Even If They Don't Have Mortgages

"Wrongful" foreclosures, foreclosures for back taxes or late condo fees -- people are getting thrown out of their homes, and someone else is profiting.

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Then there are people struggling to keep up with their real estate taxes – in some cases, taxes based on home values that are totally out of line with what their properties are actually worth today. A lot of those back taxes are owed by developers, stiffing their local communities – in Hennepin County, Minnesota, the Star-Tribune reports, “the 10 taxpayers with the highest delinquent debts, many of them developers, were responsible for a whopping 9 percent of that debt, or $5 million. In contrast, their 85 parcels made up only 1.2 percent of the 6,967 found to be delinquent.”

A new class of corporate vultures has moved in to pick the last scraps of meat off of the corpse of the American middle-class. Ventures have started snapping up tax liens at pennies on the dollar, and extracting fees of up to 25 percent of what they recover – either by dunning homeowners for the cash or via the foreclosure process.

Gannett reports that “every year, investors such as American Tax Funding provide schools, metro government and fire departments with money in lieu of property owners who fail to pay their taxes.” But that also means that millions “go to investors, typically based out of town" — millions that could be used by communities hit hard by the recession.

They also jack up what you owe, so you can never get caught up. According to Gannett, the “lien buyers can charge 'excessive' fees, especially legal costs once a case moves to foreclosure, making it nearly impossible for the homeowner to avoid losing the property.”

In Berwick, Maine, one property owner was surprised to learn his house had been auctioned off from underneath him for a fraction of its purchase price to none other than the wife of the town manager – it was the only bid that came in (the town manager insists nothing inappropriate went down in the deal).

Then there are people losing their homes who owe nothing to the bank, but are falling behind on their co-op or condominium fees. In some cases, those fees have increased dramatically to make up for fees lost to vacant units sitting in limbo.

According to the Associated Press, “one in five U.S. homeowners is subject to the will of the homeowners’ association, whose boards oversee 24.4 million homes. More than 80 percent of newly constructed homes in the U.S are in association communities.” What's more, more than 50 percent of those gated communities “now face 'serious financial problems,' according to a September survey by the Community Association Institute. An October survey found that 65 percent of homeowners’ associations have delinquency rates higher than 5 percent, up from 19 percent of associations in 2005.”

Here, again, the jackals smell some profit. The AP adds: “Before now, associations rarely, if ever, foreclosed on homeowners. But today, encouraged by a new industry of lawyers and consultants, boards are increasingly foreclosing on people 60 days past due on association fees.”

The St. Petersburg Times told a particularly troubling tale of a Brandon, Florida, couple named Ron and Angela Zappia. The two are disabled – she has cancer, he faces chronic asthma, possibly as a result of doing volunteer work at the World Trade Center site after 9/11. They get $2,100 per month in disability benefits, and were in the process of working out a loan modification on their $269,000 condo when they fell $600 behind in their dues to the homeowners' association.

Their home was immediately snapped up by an outfit called Property, Inc., which had bought up 71 homeowners' association liens in the same county in recent months. The firm told the couple they could pay $15,000 to make it “go away,” in the Times' words, or they could remain in the unit paying rent. But if they chose the latter option, the company refused to make mortgage or tax payments on the unit as other landlords do. "I said, 'Are you throwing me out of my own home?' and she said yes," Zappia said of her dealings with the company. According to the Times, “Zappia is still trying to figure out how someone could get title to her house for pennies on the dollar. 'It may be legal,' she said. 'But it's so hard to believe when you're living it.'"

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